Eastbourne Capital Management in Unprecedented Three-Way Proxy Contest
May 27, 2009
Cleary Gottlieb represented Eastbourne Capital Management, L.L.C. in a hotly-contested proxy fight to gain seats on the board of Amylin Pharmaceuticals, Inc., a California based pharmaceutical company.
In an unprecedented twist, the proxy contest involved two dissident shareholders who, limited by the company’s “poison pill” from agreeing on a unified slate of nominees, campaigned independently to elect their respective nominees to Amylin’s board. In addition to our client’s slate of five nominees, funds affiliated with Carl Icahn nominated an equally-sized slate of directors for election.
In order to ensure that shareholders would be able to use a single proxy card to vote for nominees from each dissident slate, Cleary Gottlieb requested (and obtained) on Eastbourne’s behalf a “no-action” letter from the SEC interpreting the “short-slate” proxy rule to permit Eastbourne to use its proxy card to ask for authority to vote for Icahn’s nominees. (Icahn sought and received identical relief.) Obtaining this relief set the stage for several rounds of revised proxy statements in which Eastbourne and Icahn modified the number of their respective nominees and the nominees of the other that they sought to vote for – resulting ultimately in an effectively unified dissident slate.
The proxy contest also shone a spotlight on the previously little considered impact that “change in control” put or default provisions in corporate debt instruments triggered by unauthorized changes in the composition of issuer boards – “poison puts” – can have on contested corporate elections. “Poison put” provisions contained in Amylin’s public and private debt were challenged in Delaware court by a large Amylin shareholder in connection with the proxy contest. The suit resulted in an opinion by Vice Chancellor Lamb that raises significant questions regarding the interpretation and validity of various types of “continuing director” change in control provisions.
The proxy contest culminated at the Amylin annual shareholder’s meeting held on May 27, 2009, where Eastbourne and Icahn successfully elected two new directors to the current board, unseating the long-reigning chairman and the lead independent director, after receiving the endorsement of all four proxy advisory services.